Marriage involves the merging of many aspects of life, including finances. While this union brings numerous benefits, it also raises questions about potential liabilities, especially when it comes to taxes. If your spouse owes money to the IRS, you might be wondering if you could be held responsible for their tax debt. At Top Tax Defenders, we're here to shed light on the subject and help you navigate the complexities of spousal tax liability.

Understanding Joint and Several Liability

In the eyes of the IRS, when you file a joint tax return with your spouse, you both become jointly and severally liable for the taxes owed. This means that you share the responsibility for the entire tax debt, regardless of who earned the income or incurred the debt. In other words, the IRS can come after either spouse—or both—for the full amount owed.

If you file separately, you are only responsible for the amount on your individual return. If you file jointly, you are essentially a single entity in the eyes of the IRS. That means that whether your spouse's debt was present before marriage, or accumulated during your marriage, both parties are held responsible. This also means that if you're entitled to a tax refund, the IRS has the authority to apply that refund to settle outstanding tax debt. 

The IRS has various methods to collect unpaid taxes, which could include garnishing wages, seizing bank accounts, placing liens on property, or even initiating legal action. These actions can affect your joint finances, so it's important to be aware of the potential consequences.

Innocent Spouse Relief

In situations where your spouse's tax liability is a result of inaccurate reporting, misrepresentations, or fraudulent activities without your knowledge, you may qualify for Innocent Spouse Relief. This relief option allows you to avoid being held liable for your spouse's tax debt. To qualify, you must demonstrate that you had no knowledge or reason to know about the understated tax liability.

You have two years from when you become aware that the IRS is attempting to collect additional tax to file the application for innocent spouse relief.

Separation of Liability Relief

Separation of Liability Relief is another avenue for addressing spousal tax debt. With this option, the understated tax liability is divided between you and your spouse based on each individual's contributions to the debt. You're then only held responsible for your portion of the debt.

Equitable Relief

Equitable Relief is available when you don't qualify for Innocent Spouse Relief or Separation of Liability Relief but believe that it would be unfair to hold you accountable for the tax debt. This option can be considered when there are extraordinary circumstances or hardships that would make it unjust to hold you responsible. Learn more about equitable relief and how to request it here.

Protecting Yourself

If your spouse owes the IRS money, there are several steps you can take to protect yourself and your financial well-being:

• Communication: Open communication with your spouse about the tax situation is crucial. Ensure you both understand the nature and extent of the tax debt.
• File Separately: If you're concerned about potential liability, you can choose to file your tax return separately. However, this may impact certain tax benefits, so it's essential to weigh the pros and cons.
• Seek Professional Guidance: Consulting with a tax professional or attorney experienced in dealing with spousal tax liability can help you navigate the complexities and choose the best course of action.

Understanding your options can help you navigate this challenging situation and make informed decisions.

Conclusion

While the IRS views married couples who file jointly as equally liable for the entire tax debt, relief options like Innocent Spouse Relief, Separation of Liability Relief, and Equitable Relief provide avenues for protection. It's essential to be informed about your rights and options when your spouse owes the IRS money. Consulting with professionals who specialize in tax resolution can empower you to make well-informed decisions and find the best solution for your unique circumstances.